Canada can craft an energy policy, or Trump will craft us one. You’re not going to like it

As you may have noticed, there is a new mood in the United States. It is a strange mood most haven’t seen for a while and probably immensely unsettling to most Americans as well. The root cause, of course, is a leader that has added a new chapter to chaos theory.

That might sound like hyperbole, but it’s not really if you consider for example the North Korea file. Last fall, the small, feisty answer-to-know-one nation was like a kid with a new rocket kit, firing them off and hiding behind the shrubs to see where they would go. A primary difference between the young and the crazed though was that the latter had nuclear weapons to strap on, which alters the tone of the game considerably. North Korea was thumbing its nose at the world, and each international stern-gazed head shake of disapproval was answered with yet another missile test.

The US, who has a history of isolating North Korea (remember the “Axis of Evil” theory propagated by the wise elder George W. Bush?), was attacking the problem on two fronts. First, the leader of the free world was displaying a certain joie de vivre normally associated with twelve year olds, attacking North Korea and its leader via Twitter, using the seldom-touched diplomatic tool of calling him silly names. Rex Tillerson, Trump’s handpicked Secretary of State, who ironically came from industry, was displaying a far more statesmanlike posture by assuring the media that the US was indeed communicating with North Korea through multiple indirect channels. This was the sole point of recognizable diplomacy.

Trump then threw his employee straight under the bus, tweeting to the world that Tillerson was wasting his time talking to North Korea. If any other politician had ever implied something like that to the media, it would have been couched in political finesse. What Trump actually said was more crude than my summary: “I told Rex Tillerson, our wonderful Secretary of State, that he is wasting his time trying to negotiate with Little Rocket Man.” I suppose it was a sign of some sort of weird diplomatic respect to capitalize Little Rocket Man.

But Trump is not actually crazy, not by a long shot. He is calculating, daring, and knows very well what he can get away with. He knows what tools he can use, and when.

And this is what is such bleak news for Canada.

Trump is smart enough to know where the US has an advantage, and can throw its weight around, and where it needs someone and has to play nice. Even with those whom he decides to play nice, he first throws salt in their eyes, then appears to be a decent guy when he offers a handkerchief. This is his tactic so far with respect to international trade, where he comes flying out of the corner with blistering accusations, announces tough countermeasures, then gradually back-pedals but always on more favourable terms.

With respect to energy, we really need to pay attention to several factors. First, on the American front, the country is now quite convinced that the shale revolution has or will soon make the nation energy self-sufficient. The evidence shale advocates point to is that shale oil and gas has doubled US production of each over the past decade, and that the US now exports both. The dangers to the country of assuming this a long term solution are immense, but that’s another story.

The US still imports oil and natural gas from Canada, but the need has been severely reduced, and this could be a very big problem for Canada. You can easily see why, particularly with Trump’s scorched-earth negotiating style, and with Canada’s infrastructure situation.

Suppose Trump was to unilaterally declare a tariff or tax on imports of Canadian oil and natural gas. Think of it from the US’ perspective, the pros and cons. The pros are that the US government would begin collecting a nice fat duty/tax and the US petroleum industry would not be harmed in any way. The cons are zero.

Why can we say that? Because Canada has no option. We have to sell our product to the US, we can’t sell it anywhere else. Three oil pipeline options remain in a not-quite-dead state; two of these (Enbridge Line 3 and Keystone XL) will both ship oil to the US, while the third (Trans Mountain expansion) is the only one that can help expand markets.

Natural gas is no different, or even worse. Any surplus Canadian natural gas goes to the US, period. It can possibly go through the US to Mexico, but the US would like that even better – collect a duty and pass it on through.

The Canadian industry has already shown what it will do in the face of lower prices – it will keep on producing, because it still makes economic sense to do so. That is, it makes economic sense from a corporate perspective, it makes no sense from a national one.

Canada is hugely exposed to the whims of US foreign policy, and as we have seen in the past year it has become very whimsical indeed. In fact, the best that we can hope is that it is whimsical; if it is systematic then we are surely in trouble as far as oil and natural gas exports go.

We need to get serious and see the bigger picture. The bigger picture, with respect to Canadian resources, is not climate change – Canada could be wiped off the map and within two years the added greenhouse gas emissions from growing sources in China and India would far outweigh what Canada contributed.

Have you ever taught a kid to drive a car? I know, I know, it’s just this side of evil and stop reading if you’re about to combust. If you’ve ever learned or taught this way, as I have done both of, you find a big empty field or parking lot, and you let the kid take over. You watch them timidly and gingerly take off, and they make jerky movements, and you offer words of encouragement, and you are hovering right there beside them. Then their confidence grows, very quickly, and they start stepping on the gas and enjoying the sensation. And you’re watching as this feeling grows, and then suddenly at some point you can sense trouble on the horizon, and you grab the wheel or put it in neutral and regain control before any harm is done.

We are at the point where we need to grab the wheel from a national energy perspective; the kids – the ones who have assumed control of Canada’s infrastructure development, of it’s economic future, and of its role in the global environmental movement – have been driving ever more aggressively for too long. They are cocky and think they can do anything and they’re going to smash the car. Politicians of Canada, it’s time to grab the wheel.